TaxTMI 
TaxTMI 
2003 (5) TMI 30
X X X X Extracts X X X X
X X X X Extracts X X X X
....the facts and circumstances of the case, the Income-tax Appellate Tribunal was justified in law in holding that interest once granted under section 244(1A) cannot be withdrawn subsequently?" So far as question No.2 is concerned, the decision of the Tribunal is based on a judgment of the Gujarat High Court in Cibatul Ltd. v. IAC of I.T. [1993] 201 ITR 507. The appeal against which has been dismissed by the hon'ble Supreme Court. Reference in this connection may be made to [1993] 203 ITR (St.) 2. That case relates to the question whether the Assessing Officer is empowered to withdraw interest granted under section 244(1A) of the Act. That question has been answered against the Revenue. Since the decision of the Gujarat High Court in favour of the assessee has been affirmed by the hon'ble Supreme Court, which amounts to declaration of law setling any controversy about the issue, it cannot be said that question No.2 any more remains a substantial question of law arising for consideration in this appeal. It stands answered by the aforesaid decision of the hon'ble Supreme Court. So far as the first question is concerned, in our opinion, on the accepted premises by the parties, i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eting expenditure. To understand the scheme and the arguments raised by learned counsel for the appellant, we deem it appropriate to reproduce the provisions of subsection (3A) and sub-section (3B)of section 37 which were introduced in the statute book by the Finance Act,1983, with effect from April 1,1984, and were omitted by the Finance Act,1985,with effect from April 1,1986. The two provisions remained in force for the assessment years 1984-85 and 1985-86. We are concerned in this appeal with the assessment year 1985-86. The provision as it stood in the statute book at relevant time reads as under: "37. (3A) Notwithstanding anything contained in sub-section (1), where the expenditure or, as the case may be, the aggregate expenditure incurred by an assessee on anyone or more of the items specified in subsection (3B) exceeds one hundred thousand rupees, twenty per cent. of such excess shall not be allowed as deduction in computing the income chargeable under the head 'Profits and gains of business or profession'. Original sub-section was inserted by the Finance Act, 1978, with effect from April 1,1979, and was later omitted by the Finance (No.2) Act, 1980, with effect ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....otion. Such expenditure on account of salaries paid to employees engaged in the said activities is to be considered as uninhibited allowable business expenditure, as any other expenses incurred wholly and exclusively for the purposes of the business, not otherwise specifically dealt with under the Act. The core of the issue in this appeal is whether the amount of salary which is the contentious issue between the parties is allowable expenditure in its entirety or to be governed by sub-section (3A), read with sub-section (3B) of section 37 of the Act. First of all, the salary must be paid to the employees of the assessee engaged in advertisement, publicity and sales promotion. That is to say this question would arise only when the salaries are forming part of expenditure on advertisement, publicity and sales promotion. Salary paid to the employees not engaged in any of these activities are not governed by sub-section (3A) or sub-section (3B) of section 37. The question which immediately calls for attention is whether the amount sought to be disallowed by the Revenue as expenditure while assessing the total expenditure in question can be treated in the first instance as sala....
X X X X Extracts X X X X
X X X X Extracts X X X X
....re is not an expenditure governed by sub-section (3A) and sub-section (3B) of section 37. Such expenses cannot be disallowed by referring to the inapplicability of Explanation (b) on the ground that the employees to whom salaries have been paid were not the employees of the assessee. Apparently, the Assessing Officer as well as the Commissioner of Income-tax (Appeals) have overlooked the basic premises that called for consideration that the assessee is sharing in lumpsum proportionate expenses incurred by McDowells on total marketing infrastructure for sale of products of McDowells. Such expenditure includes expenditure on advertisement, publicity and sales promotion. The assessee is to pay a lumpsum amount as his proportionate share in the expenses. It is a matter of accounting details between the parties to satisfy the mutual trust about accuracy of proportionate share of expenditure claimed by McDowells from the assessee, and the assessee accepting that liability by debiting that sum in his books of account. So far as the assessee is concerned, it is not relevant for him to question as to what different component forms part of marketing expenditure as expenditure to be sha....